Prosperity Watch Issue 15

Last month’s local area unemployment report contained some good news and some bad news for communities across North Carolina. On the positive side, unemployment rates have dropped in 91 counties since June of last year, suggesting some improvement in the jobs picture. The bad news is that most of the long-term job gains since the end of the Great Recession have been concentrated in just a few of North Carolina’s largest metro areas, namely Charlotte, Raleigh, and Greensboro.

In the three years since the end of the recession in June 2009, North Carolina has added a total of 135,272 jobs, an unadjusted total that includes the 152,237 jobs created in the state’s urban areas (specifically, in metropolitan and micropolitan areas) and the 16,965 jobs lost in rural North Carolina.

Of these total job gains in urban areas, metro areas clearly saw the largest share—nearly 135,000 jobs or 88.5 percent of total urban area job growth in North Carolina has occurred in the state’s large cities and metro areas. And the concentration of the job growth in these metros is even more pronounced—almost 65% of the state’s total job growth occurred in just three metros—Charlotte-Gastonia-Rock Hill, Raleigh-Cary, and Greensboro-High Point, which experienced a combined job growth of close to 100,000 jobs. At the same time, the remaining 11 metro areas only added about 35,000 jobs. One of these remaining metro areas, Wilmington, has actually lost more than 1,000 jobs since the Great Recession ended.

In sharp contrast to overall job growth in the metro areas, the state’s micropolitan areas (ie, small cities), only combined to add 17,000 jobs over the last three years. Of the 26 micropolitan areas, ten have lost jobs since June 2009. Furthermore, considering that non-urban areas have shed 17,000 jobs over the same time frame, micropolitan job growth has essentially been wiped out by job losses in rural North Carolina.

In June 2012, North Carolina’s economy entered the 36th month since the formal end of the Great Recession, yet the state’s workers have experienced little in the way of a real economic recovery, a new BTC report shows, especially when compared to the state’s track record following the three previous recessions of the past 30 years (those beginning in 1981, 1990, and 2001). Along with sluggish job growth and an unemployment rate stuck at 9.4 percent for the third month in a row, North Carolina is also experiencing a “wage-less” recovery—in a stark contrast with these previous economic recoveries, the state’s workers are seeing their wages fall instead of grow and are experiencing significant wage inequality.

In the three years since the formal end of the Great Recession in June 2009, median wages have dropped by 4.2 percent, in contrast to the almost 1 percent wage growth by this point in the recovery from the 2001 recession and the 3.4 percent growth by this point in the recovery from the 1990 recession.

Additionally, if the current recovery’s gap between wages and productivity has proven challenging for the average worker in North Carolina, then it has been disastrous for the lowest-wage earners in the state. Rising wage inequality since 2009 has resulted in a significant drop in wages among the lowest fifth of earners, who saw their wages drop by 7 percent (from $10.18 to $9.47 an hour), while the top fifth of earners experienced the same 4.2 percent drop as median earners (see the following figure), indicating that high-wage earners are holding up better than low-wage earners.

Compared to wage inequality in previous recoveries, however, the current picture is much more challenging. During the first 30 months of the booming post-1991 recovery, wages went up for workers across all quintiles, and although workers in the top fifth of wage earners saw their wages increase by the largest amount (7.5 percent), workers in the lowest fifth actually saw greater wage growth (4 percent) than the median worker (3.4 percent). Foreshadowing the wage inequality of the current recovery, wages during the comparable period following the 2001 recession experienced anemic growth for median workers (0.7 percent) and extremely strong growth for earners in the top fifth (2.4 percent), far different than the 4 percent wage drop in the current recovery.

Unfortunately, the true extent of inequality in wages across the entire spectrum of the state’s wage earners is actually much starker than presented in the figure above. Since the end of the recession in June 2009, hourly wages for the highest 10 percent of all earners only shrank by 2 percent (from $35.68 to $34.90)—half the percentage loss experienced by the median earner and less than a third of the losses experienced by the lowest fifth of wage earners.

As seen in a new BTC Brief, North Carolina’s struggling economic recovery and sluggish job creation have been dramatically slowed by a decade of offshoring, the movement of production—and jobs—away from relatively high-wage, advanced economies like those in United States to less-developed countries with lower wages and weaker labor standards. In the years since the mid-1990s, offshoring has become an increasingly common reality for communities across North Carolina, leaving in its wake shuttered mills, dislocated workers, and long-term unemployment.

According to newresearch by the Economic Policy Institute, this new reality has been driven by several key factors, including new technological breakthroughs like the Internet, just-in-time inventories, and flexible production techniques, coupled with national trade policies like the North American Free Trade Agreement (NAFTA) in 1994 and China’s accession into the World Trade Organization (WTO) in 2001. Taken together, these factors have spawned an intensely competitive global marketplace in which firms can search the world for the most cost-effective locations for various parts of their operations and then shift production and American jobs to those locations.

While offshoring has certainly contributed to record corporate profits over the past decade, the consequences for North Carolina have been largely negative—the most sluggish economic recovery in 30 years and the emergence of a two-tier labor market with low-wage jobs and high-wage jobs, but little in between. First, offshoring has directly contributed to large-scale layoffs over the past decade, with more than 107,000 in job losses directly attributable to offshoring to China from 2001 to 2010 and 26,500 jobs lost to offshoring to Mexico in 2010 alone. Absent these job losses, North Carolina would have almost completely returned to its pre-Great Recession employment levels by 2010, as shown in the following graph. Moreover, the magnitude and persistence of these job losses are in large part due to the state’s over-reliance on those specific industries which nationally experienced the greatest amount of offshoring over the past decade, including Textile Mill Products, Textiles and Fabrics, and Apparel and Accessories—historically, all North Carolina specialties—that combined for almost 10% of all American jobs lost to trade with China.

Secondly, offshoring in North Carolina has been accompanied by the emergence of a two-tier labor market, in which many workers in offshored industries—particularly manufacturing—are increasingly shunted into fast-growing low-wage and low-skill occupations, including Food Preparation (which pays an average wage of $8.27 an hour), Home Health Aides ($9.73 an hour), and Cashiers ($8.50 an hour). At the same time, the state is seeing growth in high-wage and high-skill occupations like Nurses, Physicians, Office Managers, Post-Secondary Teachers, which pay between $22.01 and $41.12 and require significant training and education. Unfortunately, there is little growth in the middle-wage, middle-skill occupations in between, like those traditionally associated with manufacturing that provided a reasonably secure path to middle-class prosperity. As a result, offshoring has contributed to wage stagnation and limited career mobility over the past decade.